Disaster Risk Financing and Insurance: Issues and results

Report on a workshop held at the FERDI, Université d’Auvergne, on June 4 and 5, 2015

Why the need for disaster risk financing and insurance?

Losses due to natural disasters have increased sharply over the last 30 years. This has been caused by population growth, greater concentration of population in urban environments, and more accumulation of assets that can be destroyed by natural events. Hazards have also risen with climate change and are expected to grow exponentially. What is remarkable, however, is that the gap in insurance protection between uninsured and insured natural catastrophes has been increasing, with some $125 billion uninsured losses compared to $50 billion insured worldwide in 2014, an insurance coverage of less than 30% (Economist, 2015). Industrialized countries are exposed to larger absolute losses due to asset accumulation, while developing countries are exposed to larger relative losses (in percentage of GDP) and to greater human costs. Nearly 90% of disaster related deaths between 1991 and 2005 occurred in developing nations. In the 2015 Nepal earthquake, only some 3% of the damage reaching 25% of GDP was insured. Lack of financial protection against disasters leads to slow recovery, costly financing of relief and reconstruction, and political manipulation in the allocation of post-disaster assistance.